A place to exercise ideas before writing about them with greater discipline.

Friday, September 25, 2009

CHUTZPAH Will Come of CHUTZPAH

In the context of the positive chutzpah that earned Judge Jed Rakoff his Chutzpah of the Week award, this week's award will go to Bank of America (one of the two targets for Rakoff's chutzpah) for what can only be described as "retaliatory chutzpah!" Having failed to provide Rakoff with a satisfactory explanation for the settlement agreed upon by both Bank of America and the Securities and Exchange Commission (SEC), Bank of America has decided to respond with a request of its own, just reported by Reuters:

Bank of America Corp urged a federal judge to dismiss the U.S. Securities and Exchange Commission's complaint accusing it of misleading shareholders about bonuses it let Merrill Lynch & Co pay employees before the companies' January 1 merger.

The bank's request, in a Friday filing, was expected, and came 11 days after U.S. District Judge Jed Rakoff rejected its $33 million settlement with the SEC over the $3.6 billion of bonus awards.

Rakoff, who is still handling the case, was upset that the accord did not require disclosure of the names of executives and lawyers who vetted the bonuses and the decision not to disclose them, and yet left shareholders on the hook for a fine. He called the settlement a "contrivance" that violates "the most elementary notions of justice and morality."

In its answer to the SEC's complaint, Bank of America maintained that the proxy statement for the merger did not contain false or misleading statements, or omit key facts. It also said it was not negligent in preparing the proxy statement.

SEC spokesman John Heine had no immediate comment.

In the language of diplomacy, this is all about playing "the great game." Fortunately, we have Andrew Cuomo hard at work to make sure that we are not the losers in this game. It is unclear that Bank of America's maneuver will get them anywhere, but we can still appreciate the chutzpah of the attempt!